The week ending November 18 appears to have been a week of consolidation for risk assets following the explosive rallies of October. U.S. economic data continues to show improvement but the political uncertainty in Europe and the U.S. has taken a more dominant role in market direction.

In contrast, the perceived safe haven of the U.S. Treasury market saw 10-year yields fall by 4.52 bps. On Tuesday, November 15, the European Parliament voted into law that naked short-selling and trading in credit default swaps (CDS) without owning underlined bonds, would be banned. This action did promote stability in the European bond market in the second half of the week. Perhaps, this regulation will have a meaningful impact in reining-in volatility.

Last week, the leading indicators in the U.S. came in at a surprisingly strong 0.9 percent vs. expectations of 0.6 percent. This reading was preceded by a welcoming decline in Initial Unemployment Claims to 388,000. Signs that the labor market is stabilizing and that leading indicators are portending growth, continues to suggest that long term investors will be rewarded for taking on risk.

This coming week will be a short trading week due to Thanksgiving holiday.

Nonetheless, investors will have plenty of data to chew over with PMI’s from China, EU, Germany and France. In the U.S., on Tuesday, we have Existing Home Sales and a second revision to GDP. On Wednesday, we have the release of the FOMC Minutes, Durable Goods Orders, Initial Unemployment Claims and University of Michigan Confidence data.

The tight correlation across global equities continued last week as emerging markets, developed equity markets and the S&P Index, all declined by nearly the same amount. The S&P and emerging markets declined by 3.75 percent and 3.77 percent respectively with developed equity markets declining by 3.98 percent.

The only real winner in the fixed income market was the 30-year Treasury bond market which gained 2.55 percent for the week and now stands with a 4.35 percent gain on the month. Conversely, high yield bonds were down 0.71 percent on the week and investment grade corporate bonds lost 0.47 percent. Municipal bonds were little changed with a gain of 0.05 percent.

Despite all of the global uncertainties that have been impacting risk markets, we find that volatility has remained relatively subdued. The VIX Index currently trading at 32.00 remains well off of its October high of 45.45 and below its 3-month average of 34.22. The somewhat stable volatility reading may be suggesting that stability is beginning to return to financial markets -- at least we hope so.